Property raffles: a fad or the future?

For most people, winning a lottery or raffle is only a pipe dream. Not so for Marilyn Pratt, who in April won a £3 million townhouse, as well as £10,000 cash, with just a £10 raffle ticket. The townhouse, situated in Fulham, comes with three bedrooms, a gym, an office, and a walled garden. While the house is worth much more than her home in Kent, Pratt wants to sell the house to give her daughter a chance on the property ladder.

’The house is beautiful, but I think the most likely outcome is that I’ll sell it (...) That would be fairest as I have another daughter, too. But it makes me so happy.’

House raffles see thousands of UK residents purchase tickets for a chance to win the home of their dreams. While having been around for decades, these competitions have exploded in popularity during recent years. Though clearly worth a ticket for some lucky players, are these raffles actually a good investment? What do they mean for the wider property market as a whole?

How do property raffles work?

In a house raffle, participants may buy a number of tickets to secure a chance of winning the prize home. Omaze, an American for profit fundraising company, offers five types of entry for their current ‘Win a house in Ascot’ draw:

• Postal entry: No purchase necessary
• 320 entries: £150
• 85 entries: £50
• 40 entries: £25
• 15 entries: £10

Buying more tickets will help boost your chances of winning. At the specified date (in this case 30th January 2022), the tickets are drawn and a winner is announced.

The rise of raffles

According to Loqaux, in 2019, there were just 8 property competitions. In 2020, there were 93, and in 2021 there were over 96. More than ever, people are looking for a quick win to seal their place on the property ladder. But why are property raffles on the rise?

When Covid 19 reached UK shores in March 2020, the impending tribulations for the property market seemed enough for government intervention. Chancellor Rishi Sunak introduced the Stamp Duty Holiday as a stimulus for home buyers to continue buying.

While the holiday was somewhat successful, consequential lockdowns encouraged vendors to look for new ways to sell their homes. Friends and family found innovative ways to communicate with one another, leading to the popularisation of apps like Zoom and Houseparty. This revitalisation of social media no doubt galvanised giveaways and prize draws throughout the course of the pandemic.

Though certainly a catalyst, the pandemic cannot wholly be to blame for the house raffle phenomenon. At their core, these competitions offer home buyers an exciting chance to ‘win big’ through inexpensive means. Earlier this year, researchers from both the University of Liverpool and the National Centre for Social Research found that people from poorer areas were more likely to be high-risk online gamblers. Bleak prospects often precede gambling and speculation, and the property ladder has been a luxury venture for years.

Lack of affordability in the property market

Since plummeting in the 2009 recession, house prices have been on the rise. Many ordinary people are finding themselves out-priced by the housing market. How has this happened?

1. Low-interest rates

Low mortgage rates have made buying a house more attractive than renting. Since 1992, interest rates have fallen from 15% to 0.5%, making the cost of getting a mortgage lower. Despite rising house prices, low-interest rates have made buying relatively affordable, meaning more people have been able to buy property.

2. Low supply

Due to an increasing number of households, the government has estimated that we would need 250,000 houses a year just to keep up with our growing population. Unfortunately, house building is at its lowest since World War Two. There are several reasons why:

• Shortage of supply around popular cities like London
• The government is committed to preserving the green belt across the UK
• The government has cut social housing (Margaret Thatcher’s privatisation of council properties)

Economics, at its most basic level, tells us that if demand increases faster than supply, then prices will rise.

3. Lack of first-time buyers

While the percentage of first-time buyers has fallen, the property ladder remains an extremely attractive prospect. Property value is on the rise, and the UK maintains a strong cultural desire for housing. As Omaze Winner, Marilyn Pratt, demonstrates, most first-time buyers need help from parents, whether it’s a deposit or mortgage in their name. Ordinary people, without help from their parents, are being phased out of the housing market.

According to Statista, the average age of first time house buyers in London and outside of London has increased by at least two years since 2005, from 32 and 30.6, to 34.5 and 32.6 respectively. In August 2021, the UK House Prices Index found the average house price in the UK was worth £264,244. It’s clear that property buyers are older than ever, and average house prices are reaching the upper echelons of 2015 (£270,000). Naturally, many people would jump at the opportunity to win a house - however small their chances.

Property raffles: a breakdown

The two most popular house raffles in the UK are currently Omaze and Raffle House.

How do property raffles decide a winner?

Some companies, like Raffle House, pay a third-party to make the final draw, whereas other companies, like Omaze, use an in-house computer program to randomly select a winner.

Do all proceeds from house raffles go to charity?

This depends on the raffle runner. With Omaze draws, 80% of the net proceeds go to charity, while 20% go to Omaze. Raffle House, on the other hand, does not automatically donate proceeds to charity. Users must manually input their wish for purchase money to be donated.

What types of properties can be sold in property raffles?

There’s a big variety in the types of properties listed in raffles. Omaze tends to advertise opulent properties, while Raffle House advertise more affordable houses. Properties aren’t the only commodities on offer however, with cash prizes, vehicles, and entertainment systems also up for grabs.

What are the odds of winning a house raffle?

The odds of winning a house raffle completely depend on the competition in question. They are significantly higher, however, than winning the lottery. While a lotto jackpot is 45,057,474 to 1, the odds of winning a house raffle depend on the number of tickets sold, and could be closer to 30,000 to 1.

Do you need to pay tax if you sell a prize home?

If you sell a prize home, Capital Gains is the only tax you will have to pay. You only have to pay it if the house has accumulated in value since coming into ownership. This means if you sell the home immediately after winning it, you won’t have to pay any Capital Gains.

Is it legal to raffle a house in the UK?

It is legal to raffle a house in the UK but they must follow strict regulations in accordance with the Advertising Standards Authority (ASA) and Gambling Commission standards. Failure to abide by these regulations have led to many competitions being shut down, so most organisers follow these regulations to the letter.

Some of the biggest issues for competition runners are the terms ‘property raffle’ and ‘property lottery’. Lotteries and raffles are required by law to donate all proceeds to charity. To avoid this, raffle runners avoid describing themselves as such. For instance, Omaze states that, under no certain terms, should it be referred to as a property lottery, but rather, as a ‘prize draw’.

To avoid being penned as a raffle or lottery, competitions must also allow for a ‘free entry’ option. How clear this is, is an important part of meeting ASA and Gambling Commission standards.

Omaze ‘free option’

Postal entries, while not immediately clear, are available on the far left of the ticket menu. The ‘40 Entries’ option is depicted as the ‘most popular’.

Raffle House ‘free option’

Unlike Omaze, Raffle House does not include a ‘free ticket’ option in their ticket menu. Instead, entrants can click ‘Free Entry’ in the corner of the homepage next to the ‘Sign up’ widget.

Can you raffle your house with Omaze and Raffle House?

Unfortunately, because Omaze is a US-based for profit company, you can’t raffle your property through them. Most of the properties listed on Omaze’s raffles exceed a value of £1 million. Raffle House however, allows interested vendors to contact them on their FAQS. Vendors must provide:

• Estimated sale price
• Location
• Ideal completion date
• Brief description
• Photos

Are property raffles safe to take part in?

Raffles are generally safe to take part in, however, there have been some big issues with their legitimacy.

Failure to reach completion

The number of raffles that actually reach completion is extremely low. As mentioned earlier, in 2020 there were over 93 competitions, and in 2021 there were 96. Of these competitions, 25 people won a house in 2020 (27%) and only 13 (13.5%) have won so far in 2021. Indeed, research by Winmydreamhouse.com found that, while the raffle sector is currently popular, only 19% of all competitions end with a winner. Many end up terminated with an undisclosed cash sum being awarded at the end.

Why do so many property raffles fail to complete?

Unlike lotteries, raffles rely on a certain amount of tickets being sold to participants. The owner of the property needs to make back its value in ticket sales (and hopefully a little extra), otherwise the whole point of the raffle becomes obsolete. If tickets are especially cheap, then organisers must sell large quantities in order to justify the competition.

What do winners get if raffles fail to complete?

The prize depends on the terms and conditions of each independent competition.

Some raffles, thanks to increased funding, are more scrupulous than others. Accomplished, long-running prize draws like Omaze have taken great lengths to remain palatable in the public eye. According to their FAQS, there will always be a ‘guaranteed winner for the Omaze Million Pound House Draw’, and a minimum donation to charity will be guaranteed ‘no matter what happens’. In their ‘Win a house in Ascot’ draw, the small print reads: ‘80% of the net proceeds of the draw will go to the charity, with Omaze being paid 20% (....) irrespective of sales, Omaze has guaranteed a minimum total payment of £100,000 for the charity.’

Other raffles, such as Raffle House have been engaged in a number of controversies regarding prize money. As reported by ThisIsMoney, Raffle House competition winner Lois Wright received only £173,000 despite winning the draw for a £500,000 property in Brixton. Meanwhile, the company took 50% of the funds raised by ticket sales, citing that it needed the funds to ‘get up and running’.

Undisclosed problems with the properties

One question you should always ask yourself before entering a raffle is: why has the homeowner decided to enter their property in a raffle, rather than sell it the traditional way through an estate agent?

Properties won through raffles have a history of being fraught with problems. In one well publicised case, a multi-million pound property in the Cotswolds offered by Omaze, was found to be extremely prone to flooding, costing at least £35,000 to fix.

In traditional transactions, properties are investigated thoroughly through surveys sanctioned by mortgage providers and buyers. In a prize giveaway, terms are much murkier, so problems can be concealed or omitted.

What can you do if the prize property has undisclosed problems?

If you win a prize property, but a survey reveals undisclosed problems, you have a few options. You could contact the raffle company or vendor, and see if they’re willing to make amends. If they are unwilling, you could hire a solicitor and discuss your next options.

The ASA makes it clear that:

• The award prize must be described or a reasonable equivalent.
• Runners should not mislead participants by leaving out significant conditions.

Potential to lose money on the property

Another problem with property raffles is their potential for extra costs and expenses. Traditional fees like Stamp Duty Land Tax, property searches, and conveyancing can crop up when you least expect them.

Our advice to raffle participants

If you’re thinking about entering a property raffle, remember to check the following:

How much are tickets?

One of the main attractions of these raffles is that they are relatively low-risk, meaning they cost little to enter. That being said, the cheaper the tickets are, the less likely the competition is to, statistically, reach completion.

Has the house already been on the market?

Use the Land Registry to find out if the property has been on the market before. You can see if there’s been previous issues with the property, or whether there are any outstanding bills.

What do the terms and conditions say?

Check the small print and see if there are any underlying terms and conditions that hinge on the success of the property raffle. Ideally, the winner should receive the prize property no matter how many tickets are sold.

Are house raffles here to stay?

Throughout the history of competitive television, houses have been a common prize. As far back as 1968, the NBC show Dream House (1968 - 1984) saw US couples compete for the home of their dreams. Today, shows like Interior Design Masters, Grand Designs, and Dream Home Makeover garner thousands of viewers every episode. Like house raffles, they reflect the public’s enthusiasm for property and escapism. Where they differ, of course, is monetary input.

While televised property competitions are likely here for the long haul, are house raffles to join them?

Ultimately, the ongoing popularity of house raffles depends on two factors:

• How successful they are
• The state of the property market

The general lack of success of house raffles has been well documented by many UK newspapers, including The Guardian, The Sun and The Metro. As a result, they have a rather low public opinion. In a poll on PropertyInvestorToday.co.uk, only 9% of pollsters voted that they were ‘a legitimate route to homeownership on the cheap’, while 42% voted they were ‘a money-making unregulated con’, and 49% voted they ‘could be a good thing in a far more regulated, transparent market’. Meanwhile, a survey by Winmydreamhome.com indicated that nearly three-quarters of participants found house raffles to be either ‘very untrustworthy’ (39%) or ‘somewhat untrustworthy’ (37%). The majority of those surveyed (94%) felt there should be more transparency on how ticket income is spent.

If the rise of raffles is linked to a lack of affordability in the property market however, then it’s likely that they’re here to stay. The Telegraph’s Rachel Mortimer has reported the ‘acute’ shortage of homes for sale could last well into 2022. With a depleted stock and a sustained demand, it’s unlikely that house prices will go down before the end of 2021.

Can I raffle my house?

Yes you can, but raffles are still very much murky territory. At the very least, you would need to hire a solicitor to ensure everything is permissible with the Gambling Commission and ASA. You would need to apply for a license, and donate some of the proceeds to charity.